President Elect Trump’s Tax Plans Could Benefit Dual Canadian/American Citizens

22 Mar 2023

If you’re a wealthy Canadian/American dual citizen, incoming President Trump’s tax plans might be a welcome bit of news for you.

Of the many aspects of Donald Trump’s proposed tax plan, two may affect certain individuals more than any other: the promised repeal of the U.S. estate tax and the cancellation of the Affordable Care Act (ACA).

As per an interesting piece in the Financial Post by Jamie Golombek, The United States and Canada differ on a key thing. Taxing the estate of those who have passed away. Unlike Canada, the U.S. has an estate tax on the fair market value of an American’s assets upon death. In Canada, we tax only on the unrealized appreciation of an individual’s assets, and we don’t apply a tax on your primary residence. We also tax the fair market value of your RRSP or RRIF on death. High-net-worth U.S. citizens living in Canada, including dual citizens, and non-U.S. citizens who own “U.S.-situs property” at the time of death may still be caught by the U.S. estate tax.

Canadians who are not U.S. citizens are permitted prorated access to a $5.45 million dollar USD exemption under the Canada-U.S. tax treaty, based on the fraction of the value of their “U.S. situs property” divided by the value of their worldwide estate. Common examples of U.S. situs property are U.S. real estate or U.S. shares. The potential elimination of the U.S. estate tax would also benefit wealthy Canadian families with children living in the U.S. by making their estate planning much simpler.

Under the current rules, if you leave your assets to someone who is a U.S. person, such as a son or daughter who moved to the U.S., then U.S. estate taxes could impact the value of the assets that your beneficiaries (and future generations) are able to retain.

Read the full piece in the Financial Post, here.